Re: [Quantlib-users] bond helpers pricing on curve

[Mike D. <mik...@gm...>]

Reference date = date which has discount factor of 1.0

So if you build a curve say with data from Tokyo open tonight, which is for
trade date Monday June 8, then 6/8/20 should be your reference date. The
settlement date of any instruments can and usually will be a different
 date.

I would assume that all the NPV calculations are discounting back to
reference date.

- Mike

On Sun, Jun 7, 2020 at 11:33 Philippe Hatstadt <
phi...@ex...> wrote:

> Luigi,
> what do you mean by "reference date" of the curve?
> The odd behavior I am observing is that if I build a curve with 2y, 3y,
> 5y, 7y, 10y and 30y US treasuries, and then I manually blip the 2y point to
> compute a key rate dv01, I would expect that only the 2y price is impacted.
> This is by setting  as follows: ql.Settings.instance().evaluationDate =
> settle_date. To be 100% clear, I am repricing the bonds used to build
> the curve on the curve itself via a PricingEngine, not using bond math.
> However, the behavior I observe is that all maturities are slightly
> impacted by blipping the 2y price used to build the curve, whereas for
> instance, the 5y is not impacted by blipping the 3y, and the 10y is not
> impacted by clipping the 3y or the 5y. Furthermore, I set the yield on the
> 2y to zero, in which case the impact was zero.
> So my conclusion is that although I set the evaluationDate to settle date,
> the NPV() method discounts to trade_date, and since the first instrument I
> use to build my curve is the 2y, then the discount factor from trade date
> to settle date is only impacted by the 2y yield.
> Lastly, if I do  ql.Settings.instance().evaluationDate  = trade_date, then
> everything works as expected. However, this is exactly the behavior I would
> not expect, as I would only expect the 2y sensitivity to impact valuation
> Date based on settle_date, in which case all discounting from tared date to
> settle date is irrelevant.
> So I am utterly confused by how to use evaluationDate to discount properly
> to either trade or settle date with the NPV() method.
> Data is below, i highlighted in yellow the "anomaly", which would be
> expected if evaluationDate was set to trade date and not settle date.
>
> evaluationDate = settle date
>   2y 3y 5y 7y 10y 30y
> 2y -192.38 -0.27 -0.28 -0.28 -0.27 -0.27
> 3y 0.00 -295.21 0.00 0.00 0.00 0.00
> 5y 0.00 0.00 -488.57 0.00 0.00 0.00
> 7y 0.00 0.00 0.00 -679.34 0.00 0.00
> 10y 0.00 0.00 0.00 0.00 -960.92 0.00
> 30y 0.00 0.00 0.00 0.00 0.00 -2,404.86
>
> evaluationDate = trade date
>   2y 3y 5y 7y 10y 30y
> 2y -191.12 0.00 0.00 0.00 0.00 0.00
> 3y 1.26 -295.48 0.00 0.00 0.00 0.00
> 5y 1.26 0.00 -488.85 0.00 0.00 0.00
> 7y 1.26 0.00 0.00 -679.61 0.00 0.00
> 10y 1.26 0.00 0.00 0.00 -961.17 0.00
> 30y 1.26 0.00 0.00 0.00 0.00 -2,405.04
>
>
> Philippe
>
>
> On Fri, May 29, 2020 at 3:31 PM Luigi Ballabio <lui...@gm...>
> wrote:
>
>> Philippe,
>>     bond.NPV() discounts to the reference date of the discount curve.
>> bond.dirtyPrice() discounts to the settlement, and thus it does hold that
>> dirtyPrice() - accruedInterest() equals cleanPrice().  As you say, the same
>> doesn't hold for NPV.
>>
>> Hope this helps,
>>     Luigi
>>
>>
>> On Fri, May 29, 2020 at 9:26 PM Philippe Hatstadt <
>> phi...@ex...> wrote:
>>
>>> Peter & others,
>>> Is it 100% a fact that NPV() discounts to today and not to settle date?
>>> because I was trying to reconcile NPV() - accruedInterest() versus
>>> cleanPrice() but that should not work if they don't have the same
>>> settlement date
>>>
>>>
>>> Regards
>>>
>>> Philippe
>>>
>>>
>>> On Fri, May 29, 2020 at 8:49 AM Peter Caspers <pca...@gm...>
>>> wrote:
>>>
>>>> I believe helper.bond().cleanPrice() returns the (clean) price on the
>>>> curve, but as of the bond’s settlement date, typically this is today + 2bd.
>>>> NPV() returns the (dirty) price as of today on the other hand. Could that
>>>> explain the difference you see?
>>>> BR, Peter
>>>>
>>>> On 29 May 2020, at 03:34, Philippe Hatstadt <
>>>> phi...@ex...> wrote:
>>>>
>>>> One unanswered question is whether helper.bond().cleanPrice() is
>>>> supposed to return the clean price of the helper priced on the curve, or
>>>> just the cleanPrice parameter that was used to build the helper?
>>>> Given that it matches to 6 digits of precision the input quote
>>>> clesan price, I assume it is not based on valuation on the curve,
>>>> which should be equal to NPV(0 - accruedInterest but I would be keen to
>>>> know.
>>>>
>>>> Regards
>>>>
>>>> Philippe
>>>>
>>>>
>>>> On Thu, May 28, 2020 at 5:06 PM Mike DelMedico <
>>>> mik...@gm...> wrote:
>>>>
>>>>> Without looking at your code I would guess is a convention thing when
>>>>> you pass instrument specs to the ratehelper. Day counter, calendar, and
>>>>> coupon frequency come to mind?  Maybe try gathering the cash flows off the
>>>>> bond object and see if they match what you expect?
>>>>>
>>>>> -Mike
>>>>>
>>>>>
>>>>>
>>>>> On Thu, May 28, 2020 at 15:34 Philippe Hatstadt <
>>>>> phi...@ex...> wrote:
>>>>>
>>>>>> I am building a US treasury curve from on the run 2/3/5/7/10/30y US
>>>>>> bonds, via tradition bond helper list and so on. How can I tell the quality
>>>>>> of the fit of the curve? Since it's a straight bootstrapping with
>>>>>> PiecewiseFlatForward, I would expect the repricing to be exact.
>>>>>> In order to do that, I am doing first helper.bond().NPV(), which for
>>>>>> the 30y bond gives me a price of 97.0322, whereas if I do
>>>>>> helper.bond().cleanPrice(), I get 97.015625.
>>>>>> Here is the issue: the latter price is *exactly* the input price that
>>>>>> I entered, however, the difference between NPV() and cleanPrice() is not
>>>>>> equal to the correct accrued interest of 0.03767 but equal to 0.01669.
>>>>>> So either (a) helper.bond().cleanPrice() only returns the quote that
>>>>>> was entered, but not the clean price of the bond calculated on the curve,
>>>>>> or (b) the curve construction does not reprice the helper bond exactly,
>>>>>> thence the incorrect value of 0.01699 above.
>>>>>> So I am looking for some guidance on how to evaluate the exactitude
>>>>>> of the curve building?
>>>>>>
>>>>>> Regards
>>>>>>
>>>>>> Philippe
>>>>>>
>>>>>>
>>>>>>
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>>>>>
>>>>
>>>>
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>>>>
>>>
>>>
>>> Brokerage services offered through Exos Securities LLC, member of SIPC
>>> <http://www.sipc.org/> / FINRA <http://www.finra.org/>. For important
>>> disclosures, click here <https://www.exosfinancial.com/disclosures>.
>>> _______________________________________________
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>>
>
>
> Brokerage services offered through Exos Securities LLC, member of SIPC
> <http://www.sipc.org/> / FINRA <http://www.finra.org/>. For important
> disclosures, click here <https://www.exosfinancial.com/disclosures>.
> _______________________________________________
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> https://lists.sourceforge.net/lists/listinfo/quantlib-users
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